For freedom and liberty, low taxes, less government, high social capital, and strong national defense

Friday, January 26, 2007

Italian Lessons For Iraq

Iraq is a brave attempt to bring democracy to a brutalized people. But it seems increasingly probable it won't work, because the level of corruption and associated low social capital can't support a democracy.

These dark thoughts are occasioned by four days trying and failing to put a deal together in Italy - a nation halfway between the US and Iraq in its corruption level.

A measure of the amount of social capital - and hence trust - in a nation is its Corruption Perceptions Index rating, which tracks corruption in public officials. Finland is least corrupt with a score of 9.6, the UK comes 11th equal with a score of 8.6, and the US is 20th equal with a score of 7.3 (I suspect dragged down by the likes of Louisiana).

Italy comes 45th, with a score of 4.9, the most corrupt of the "old" EU nations other than Greece, which scores 4.4.

Buying real estate in Italy is an agonizing process - we've had three deals fall through when the vendor upped the agreed price after he thought we were hooked. That's typical of a low trust society.

We live part of the year in another nation that scores somewhere between Italy and the US, and as previously noted observe the people there gain social cachet from behaving dishonestly and selfishly.

Modern economies and democracies depend on contracts, both based on trust. Absent that, economic players spend a lot of their time insuring against breach, while politicians play that game for money, not vanity. So, in spite of the enormous talents of the Italian people, their economy struggles to keep up with the other EU nations, and their politics are a corrupt farce The low CPI might even explain the very low Italian birth rate - marriage is a contract!

Now consider Iraq. It has a CPI score of 1.9, making it the third most corrupt nation in the world - even the Iranian kleptocracy comes in at 2.7. If Italy struggles at 4.9, its hard to see Iraq building a modern, democratic economy at 2.7.

There's some hope - Iraq will likely hide islands of integrity, and if the US does concede defeat, perhaps those islands will survive - the Kurds for example.

But if we can't help corrupt nations to modernize, their future is bleak,